Giving Wall Street a BreakCompanies that have settled securities fraud cases with the government are excluded from certain benefits by the Securities and Exchange Commission. But an analysis of S.E.C. documents by The New York Times found that the commission routinely waived those exclusions for Wall Street firms. In total, the S.E.C. issued at least 344 waivers. Those shown below allowed the banks to keep their status as “well-known seasoned issuers,” and to be protected when making forward-looking statements.

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JPMorgan Chase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

Chris Kleponis/Bloomberg News

David Ruder, a former S.E.C. chairman

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Others, however, argue that the pattern is another example of the government being too soft on Wall Street as it has become a much larger part of the economy in recent decades.

President Obama, in his State of the Union address, asked Congress last week for tougher laws that make “the penalties for fraud count.” Federal judges in New York and Wisconsin recently criticized the S.E.C. for its habit of settling cases by allowing companies to promise not to violate the law in the future.

The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

Senator Charles E. Grassley, an Iowa Republican who serves on committees that oversee the S.E.C., said he was baffled that the agency had recently asked Congress for more enforcement powers when it had ceded much of the power it already had.

Mandel Ngan/Agence France-Presse — Getty Images

Senator Charles Grassley, who sits on committees overseeing the S.E.C.

“It’s really hard to see why the S.E.C. isn’t using all of its weapons to deter fraud,” he said. “It makes already weak punishment even weaker by waiving the regulations that impose significant consequences on the companies that settle fraud charges. No wonder recidivism is such a problem.”

The Times analysis found 11 instances where companies that had settled fraud cases had actually lost the special privilege for fast-track stock or bond offerings, versus 49 times that the S.E.C. granted waivers from the punishment to Wall Street firms since 2005. The analysis counted 91 waivers since 2000 granting immunity from lawsuits, and 204 waivers related to raising money for small companies and managing mutual funds.

The S.E.C. does not maintain a central database of how many companies lose special status or are denied waivers. Its records of granted waivers are scattered across several databases on its Web site.

JPMorgan Chase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

“That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

Citigroup is one of the rare Wall Street giants that has lost significant privileges recently. In October 2010, the bank paid $75 million to settle charges that it misled investors in 2007 about the size of its holdings of assets backed by subprime mortgages. The company told investors that it had about $13 billion of those risky investments on its balance sheet, when it really had more than $50 billion, according to the S.E.C.

Because those accusations involved Citigroup’s statements about its own financial well-being, the company lost for three years the ability to insulate itself from lawsuits over mistaken predictions about its business. It also lost, for the same three years, the exemption for “well-known seasoned issuers,” which allowed it to quickly raise capital in the securities markets. As a result, Citigroup has had to file thousands of pages of new documents with the S.E.C. and wait weeks for the agency’s approvals to make itself eligible to sell stocks, bonds and other securities to the public.

Citigroup declined to comment on whether the sanctions have had any effect on its business.

Wrangling over waivers is an important part of the negotiations when companies accused of fraud discuss a settlement with the S.E.C., and sometimes it can involve a form of corporate plea bargaining to a lesser charge.

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. According to a report by the then-S.E.C. inspector general, H. David Kotz, the waiver issue “was of such importance to B. of A. that the settlement became contingent on B. of A.’s receipt of the waiver.”

Bank of America apparently won the argument but would not comment on it. It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

S.E.C. officials said they would not discuss how they arrived at specific settlements and declined to comment on the Citigroup, JP Morgan or Bank of America settlements.

Thomas Lee Hazen, a securities law professor at the University of North Carolina at Chapel Hill, said that it is understandable that the S.E.C. might relax some potential sanctions on Wall Street firms — where it appears that lessons have been learned, or when a fine is thought to be sufficient punishment.

“The ripple effect of having a sanction that could shut them down or could seriously impede a company’s operations would seriously affect a lot of innocent customers,” he said. “It’s a very fine balance. That’s not to say that the S.E.C. is striking the balance properly. That is in the eye of the beholder.”

WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.Multimedia

Mandel Ngan/Agence France-Presse — Getty ImagesSenator Charles Grassley, who sits on committees overseeing the S.E.C.Readers’ CommentsShare your thoughts.Post a Comment »Read All Comments (186) »By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Others, however, argue that the pattern is another example of the government being too soft on Wall Street as it has become a much larger part of the economy in recent decades.

President Obama, in his State of the Union address, asked Congress last week for tougher laws that make “the penalties for fraud count.” Federal judges in New York and Wisconsin recently criticized the S.E.C. for its habit of settling cases by allowing companies to promise not to violate the law in the future.

The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

Senator Charles E. Grassley, an Iowa Republican who serves on committees that oversee the S.E.C., said he was baffled that the agency had recently asked Congress for more enforcement powers when it had ceded much of the power it already had.

“It’s really hard to see why the S.E.C. isn’t using all of its weapons to deter fraud,” he said. “It makes already weak punishment even weaker by waiving the regulations that impose significant consequences on the companies that settle fraud charges. No wonder recidivism is such a problem.”

The Times analysis found 11 instances where companies that had settled fraud cases had actually lost the special privilege for fast-track stock or bond offerings, versus 49 times that the S.E.C. granted waivers from the punishment to Wall Street firms since 2005. The analysis counted 91 waivers since 2000 granting immunity from lawsuits, and 204 waivers related to raising money for small companies and managing mutual funds.

The S.E.C. does not maintain a central database of how many companies lose special status or are denied waivers. Its records of granted waivers are scattered across several databases on its Web site.

JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

“That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

Citigroup is one of the rare Wall Street giants that has lost significant privileges recently. In October 2010, the bank paid $75 million to settle charges that it misled investors in 2007 about the size of its holdings of assets backed by subprime mortgages. The company told investors that it had about $13 billion of those risky investments on its balance sheet, when it really had more than $50 billion, according to the S.E.C.

Because those accusations involved Citigroup’s statements about its own financial well-being, the company lost for three years the ability to insulate itself from lawsuits over mistaken predictions about its business. It also lost, for the same three years, the exemption for “well-known seasoned issuers,” which allowed it to quickly raise capital in the securities markets. As a result, Citigroup has had to file thousands of pages of new documents with the S.E.C. and wait weeks for the agency’s approvals to make itself eligible to sell stocks, bonds and other securities to the public.

Citigroup declined to comment on whether the sanctions have had any effect on its business.

Wrangling over waivers is an important part of the negotiations when companies accused of fraud discuss a settlement with the S.E.C., and sometimes it can involve a form of corporate plea bargaining to a lesser charge.

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. According to a report by the then-S.E.C. inspector general, H. David Kotz, the waiver issue “was of such importance to B. of A. that the settlement became contingent on B. of A.’s receipt of the waiver.”

Bank of America apparently won the argument but would not comment on it. It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

S.E.C. officials said they would not discuss how they arrived at specific settlements and declined to comment on the Citigroup, JP Morgan or Bank of America settlements.

Thomas Lee Hazen, a securities law professor at the University of North Carolina at Chapel Hill, said that it is understandable that the S.E.C. might relax some potential sanctions on Wall Street firms — where it appears that lessons have been learned, or when a fine is thought to be sufficient punishment.

“The ripple effect of having a sanction that could shut them down or could seriously impede a company’s operations would seriously affect a lot of innocent customers,” he said. “It’s a very fine balance. That’s not to say that the S.E.C. is striking the balance properly. That is in the eye of the beholder.”

WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.Multimedia

Mandel Ngan/Agence France-Presse — Getty ImagesSenator Charles Grassley, who sits on committees overseeing the S.E.C.Readers’ CommentsShare your thoughts.Post a Comment »Read All Comments (186) »By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Others, however, argue that the pattern is another example of the government being too soft on Wall Street as it has become a much larger part of the economy in recent decades.

President Obama, in his State of the Union address, asked Congress last week for tougher laws that make “the penalties for fraud count.” Federal judges in New York and Wisconsin recently criticized the S.E.C. for its habit of settling cases by allowing companies to promise not to violate the law in the future.

The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

Senator Charles E. Grassley, an Iowa Republican who serves on committees that oversee the S.E.C., said he was baffled that the agency had recently asked Congress for more enforcement powers when it had ceded much of the power it already had.

“It’s really hard to see why the S.E.C. isn’t using all of its weapons to deter fraud,” he said. “It makes already weak punishment even weaker by waiving the regulations that impose significant consequences on the companies that settle fraud charges. No wonder recidivism is such a problem.”

The Times analysis found 11 instances where companies that had settled fraud cases had actually lost the special privilege for fast-track stock or bond offerings, versus 49 times that the S.E.C. granted waivers from the punishment to Wall Street firms since 2005. The analysis counted 91 waivers since 2000 granting immunity from lawsuits, and 204 waivers related to raising money for small companies and managing mutual funds.

The S.E.C. does not maintain a central database of how many companies lose special status or are denied waivers. Its records of granted waivers are scattered across several databases on its Web site.

JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

“That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

Citigroup is one of the rare Wall Street giants that has lost significant privileges recently. In October 2010, the bank paid $75 million to settle charges that it misled investors in 2007 about the size of its holdings of assets backed by subprime mortgages. The company told investors that it had about $13 billion of those risky investments on its balance sheet, when it really had more than $50 billion, according to the S.E.C.

Because those accusations involved Citigroup’s statements about its own financial well-being, the company lost for three years the ability to insulate itself from lawsuits over mistaken predictions about its business. It also lost, for the same three years, the exemption for “well-known seasoned issuers,” which allowed it to quickly raise capital in the securities markets. As a result, Citigroup has had to file thousands of pages of new documents with the S.E.C. and wait weeks for the agency’s approvals to make itself eligible to sell stocks, bonds and other securities to the public.

Citigroup declined to comment on whether the sanctions have had any effect on its business.

Wrangling over waivers is an important part of the negotiations when companies accused of fraud discuss a settlement with the S.E.C., and sometimes it can involve a form of corporate plea bargaining to a lesser charge.

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. According to a report by the then-S.E.C. inspector general, H. David Kotz, the waiver issue “was of such importance to B. of A. that the settlement became contingent on B. of A.’s receipt of the waiver.”

Bank of America apparently won the argument but would not comment on it. It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

S.E.C. officials said they would not discuss how they arrived at specific settlements and declined to comment on the Citigroup, JP Morgan or Bank of America settlements.

Thomas Lee Hazen, a securities law professor at the University of North Carolina at Chapel Hill, said that it is understandable that the S.E.C. might relax some potential sanctions on Wall Street firms — where it appears that lessons have been learned, or when a fine is thought to be sufficient punishment.

“The ripple effect of having a sanction that could shut them down or could seriously impede a company’s operations would seriously affect a lot of innocent customers,” he said. “It’s a very fine balance. That’s not to say that the S.E.C. is striking the balance properly. That is in the eye of the beholder.”

WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.Multimedia

Mandel Ngan/Agence France-Presse — Getty ImagesSenator Charles Grassley, who sits on committees overseeing the S.E.C.Readers’ CommentsShare your thoughts.Post a Comment »Read All Comments (186) »By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Others, however, argue that the pattern is another example of the government being too soft on Wall Street as it has become a much larger part of the economy in recent decades.

President Obama, in his State of the Union address, asked Congress last week for tougher laws that make “the penalties for fraud count.” Federal judges in New York and Wisconsin recently criticized the S.E.C. for its habit of settling cases by allowing companies to promise not to violate the law in the future.

The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

Senator Charles E. Grassley, an Iowa Republican who serves on committees that oversee the S.E.C., said he was baffled that the agency had recently asked Congress for more enforcement powers when it had ceded much of the power it already had.

“It’s really hard to see why the S.E.C. isn’t using all of its weapons to deter fraud,” he said. “It makes already weak punishment even weaker by waiving the regulations that impose significant consequences on the companies that settle fraud charges. No wonder recidivism is such a problem.”

The Times analysis found 11 instances where companies that had settled fraud cases had actually lost the special privilege for fast-track stock or bond offerings, versus 49 times that the S.E.C. granted waivers from the punishment to Wall Street firms since 2005. The analysis counted 91 waivers since 2000 granting immunity from lawsuits, and 204 waivers related to raising money for small companies and managing mutual funds.

The S.E.C. does not maintain a central database of how many companies lose special status or are denied waivers. Its records of granted waivers are scattered across several databases on its Web site.

JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

“That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

Citigroup is one of the rare Wall Street giants that has lost significant privileges recently. In October 2010, the bank paid $75 million to settle charges that it misled investors in 2007 about the size of its holdings of assets backed by subprime mortgages. The company told investors that it had about $13 billion of those risky investments on its balance sheet, when it really had more than $50 billion, according to the S.E.C.

Because those accusations involved Citigroup’s statements about its own financial well-being, the company lost for three years the ability to insulate itself from lawsuits over mistaken predictions about its business. It also lost, for the same three years, the exemption for “well-known seasoned issuers,” which allowed it to quickly raise capital in the securities markets. As a result, Citigroup has had to file thousands of pages of new documents with the S.E.C. and wait weeks for the agency’s approvals to make itself eligible to sell stocks, bonds and other securities to the public.

Citigroup declined to comment on whether the sanctions have had any effect on its business.

Wrangling over waivers is an important part of the negotiations when companies accused of fraud discuss a settlement with the S.E.C., and sometimes it can involve a form of corporate plea bargaining to a lesser charge.

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. According to a report by the then-S.E.C. inspector general, H. David Kotz, the waiver issue “was of such importance to B. of A. that the settlement became contingent on B. of A.’s receipt of the waiver.”

Bank of America apparently won the argument but would not comment on it. It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

S.E.C. officials said they would not discuss how they arrived at specific settlements and declined to comment on the Citigroup, JP Morgan or Bank of America settlements.

Thomas Lee Hazen, a securities law professor at the University of North Carolina at Chapel Hill, said that it is understandable that the S.E.C. might relax some potential sanctions on Wall Street firms — where it appears that lessons have been learned, or when a fine is thought to be sufficient punishment.

“The ripple effect of having a sanction that could shut them down or could seriously impede a company’s operations would seriously affect a lot of innocent customers,” he said. “It’s a very fine balance. That’s not to say that the S.E.C. is striking the balance properly. That is in the eye of the beholder.”

WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.Multimedia

Mandel Ngan/Agence France-Presse — Getty ImagesSenator Charles Grassley, who sits on committees overseeing the S.E.C.Readers’ CommentsShare your thoughts.Post a Comment »Read All Comments (186) »By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Others, however, argue that the pattern is another example of the government being too soft on Wall Street as it has become a much larger part of the economy in recent decades.

President Obama, in his State of the Union address, asked Congress last week for tougher laws that make “the penalties for fraud count.” Federal judges in New York and Wisconsin recently criticized the S.E.C. for its habit of settling cases by allowing companies to promise not to violate the law in the future.

The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

Senator Charles E. Grassley, an Iowa Republican who serves on committees that oversee the S.E.C., said he was baffled that the agency had recently asked Congress for more enforcement powers when it had ceded much of the power it already had.

“It’s really hard to see why the S.E.C. isn’t using all of its weapons to deter fraud,” he said. “It makes already weak punishment even weaker by waiving the regulations that impose significant consequences on the companies that settle fraud charges. No wonder recidivism is such a problem.”

The Times analysis found 11 instances where companies that had settled fraud cases had actually lost the special privilege for fast-track stock or bond offerings, versus 49 times that the S.E.C. granted waivers from the punishment to Wall Street firms since 2005. The analysis counted 91 waivers since 2000 granting immunity from lawsuits, and 204 waivers related to raising money for small companies and managing mutual funds.

The S.E.C. does not maintain a central database of how many companies lose special status or are denied waivers. Its records of granted waivers are scattered across several databases on its Web site.

JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

“That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

Citigroup is one of the rare Wall Street giants that has lost significant privileges recently. In October 2010, the bank paid $75 million to settle charges that it misled investors in 2007 about the size of its holdings of assets backed by subprime mortgages. The company told investors that it had about $13 billion of those risky investments on its balance sheet, when it really had more than $50 billion, according to the S.E.C.

Because those accusations involved Citigroup’s statements about its own financial well-being, the company lost for three years the ability to insulate itself from lawsuits over mistaken predictions about its business. It also lost, for the same three years, the exemption for “well-known seasoned issuers,” which allowed it to quickly raise capital in the securities markets. As a result, Citigroup has had to file thousands of pages of new documents with the S.E.C. and wait weeks for the agency’s approvals to make itself eligible to sell stocks, bonds and other securities to the public.

Citigroup declined to comment on whether the sanctions have had any effect on its business.

Wrangling over waivers is an important part of the negotiations when companies accused of fraud discuss a settlement with the S.E.C., and sometimes it can involve a form of corporate plea bargaining to a lesser charge.

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. According to a report by the then-S.E.C. inspector general, H. David Kotz, the waiver issue “was of such importance to B. of A. that the settlement became contingent on B. of A.’s receipt of the waiver.”

Bank of America apparently won the argument but would not comment on it. It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

S.E.C. officials said they would not discuss how they arrived at specific settlements and declined to comment on the Citigroup, JP Morgan or Bank of America settlements.

Thomas Lee Hazen, a securities law professor at the University of North Carolina at Chapel Hill, said that it is understandable that the S.E.C. might relax some potential sanctions on Wall Street firms — where it appears that lessons have been learned, or when a fine is thought to be sufficient punishment.

“The ripple effect of having a sanction that could shut them down or could seriously impede a company’s operations would seriously affect a lot of innocent customers,” he said. “It’s a very fine balance. That’s not to say that the S.E.C. is striking the balance properly. That is in the eye of the beholder.”

WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.Multimedia

Mandel Ngan/Agence France-Presse — Getty ImagesSenator Charles Grassley, who sits on committees overseeing the S.E.C.Readers’ CommentsShare your thoughts.Post a Comment »Read All Comments (186) »By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Others, however, argue that the pattern is another example of the government being too soft on Wall Street as it has become a much larger part of the economy in recent decades.

President Obama, in his State of the Union address, asked Congress last week for tougher laws that make “the penalties for fraud count.” Federal judges in New York and Wisconsin recently criticized the S.E.C. for its habit of settling cases by allowing companies to promise not to violate the law in the future.

The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

Senator Charles E. Grassley, an Iowa Republican who serves on committees that oversee the S.E.C., said he was baffled that the agency had recently asked Congress for more enforcement powers when it had ceded much of the power it already had.

“It’s really hard to see why the S.E.C. isn’t using all of its weapons to deter fraud,” he said. “It makes already weak punishment even weaker by waiving the regulations that impose significant consequences on the companies that settle fraud charges. No wonder recidivism is such a problem.”

The Times analysis found 11 instances where companies that had settled fraud cases had actually lost the special privilege for fast-track stock or bond offerings, versus 49 times that the S.E.C. granted waivers from the punishment to Wall Street firms since 2005. The analysis counted 91 waivers since 2000 granting immunity from lawsuits, and 204 waivers related to raising money for small companies and managing mutual funds.

The S.E.C. does not maintain a central database of how many companies lose special status or are denied waivers. Its records of granted waivers are scattered across several databases on its Web site.

JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

“That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

Citigroup is one of the rare Wall Street giants that has lost significant privileges recently. In October 2010, the bank paid $75 million to settle charges that it misled investors in 2007 about the size of its holdings of assets backed by subprime mortgages. The company told investors that it had about $13 billion of those risky investments on its balance sheet, when it really had more than $50 billion, according to the S.E.C.

Because those accusations involved Citigroup’s statements about its own financial well-being, the company lost for three years the ability to insulate itself from lawsuits over mistaken predictions about its business. It also lost, for the same three years, the exemption for “well-known seasoned issuers,” which allowed it to quickly raise capital in the securities markets. As a result, Citigroup has had to file thousands of pages of new documents with the S.E.C. and wait weeks for the agency’s approvals to make itself eligible to sell stocks, bonds and other securities to the public.

Citigroup declined to comment on whether the sanctions have had any effect on its business.

Wrangling over waivers is an important part of the negotiations when companies accused of fraud discuss a settlement with the S.E.C., and sometimes it can involve a form of corporate plea bargaining to a lesser charge.

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. According to a report by the then-S.E.C. inspector general, H. David Kotz, the waiver issue “was of such importance to B. of A. that the settlement became contingent on B. of A.’s receipt of the waiver.”

Bank of America apparently won the argument but would not comment on it. It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

S.E.C. officials said they would not discuss how they arrived at specific settlements and declined to comment on the Citigroup, JP Morgan or Bank of America settlements.

Thomas Lee Hazen, a securities law professor at the University of North Carolina at Chapel Hill, said that it is understandable that the S.E.C. might relax some potential sanctions on Wall Street firms — where it appears that lessons have been learned, or when a fine is thought to be sufficient punishment.

“The ripple effect of having a sanction that could shut them down or could seriously impede a company’s operations would seriously affect a lot of innocent customers,” he said. “It’s a very fine balance. That’s not to say that the S.E.C. is striking the balance properly. That is in the eye of the beholder.”

The OSC is clearly no collection agencyJEFF GRAY — LAW REPORTERGlobe and Mail BlogPosted on Thursday, January 19, 2012 4:27PM EST

Admittedly, the figures put out this week by the Ontario Securities Commission look bad enough at first glance. Since 2005, the OSC has collected less than 1 per cent of the $73.36-million in fines it has imposed on fraudsters and other rule-breakers after defeating them in contested hearings.

MORE RELATED TO THIS STORYOSC collects only a fraction of fines it imposesAfter outcry, OSC to hold hearing on 'no-contest' dealsAs OSC ponders 'no-contest' deals, idea faces criticism in U.S.

The agency blames the lack of recovered money on the ability of bad guys to hide assets. It points out that it has had success with winning more and longer jail sentences for some offenders lately, and says it extends bans on trading and other activities for deadbeats who don’t pay up.

The OSC’s collection rate for fines imposed as part of settlements with violators -- the regulator’s version of plea-bargains -- appears much better, with about 71 per cent of that money coming in.

However, even that number deserves a second look. The OSC says it collected $109.79-million in fines and costs agreed to in settlements, of the $155.52-million pledged to it.

Those figures include the $28-million in settlements made in 2009 with establishment financial institutions Canadian Imperial Bank of Commerce, CIBC World Markets and HSBC Bank Canada, over their failings in the meltdown of the asset-backed commercial paper market in the summer of 2007.

That money could not have been hard to collect. Big banks, unlike serial fraudsters, tend to be quite concerned about their repuations.

Subtract that amount from the total the OSC says it was able to rake in from settlements, and the agency only got its hands on $81.79-million. If you also strip the bank’s $28-million out of the total amount pledged in settlements, the result shows the OSC recovering just 64 per cent of penalties promised in deals with the remaining wrongdoers. And this is money that people and companies in trouble actually agreed to pay in order to settle their cases.

The lower number provides a more realistic assessment of just how little of the money the OSC imposes in fines -- even the money that rule-breakers agree to pay -- ends up coming to it from the more run-of-the-mill offenders, such as "boiler-room" operators, that it deals with.

The OSC acknowledges that it has hardened its stance in settlement talks in recent years, and that it chooses not to take into account a rule-breaker’s ability to pay when demanding a dollar amount.

As the agency’s director of enforcement, Tom Atkinson, said in an interview this week: “You don’t want to waive your penalties because someone comes before you and says ‘I’ve stolen a million dollars from victims, but I’ve spent it all now, so don’t fine me and I just want to walk out of here.’”

He said both that the OSC had already made exhaustive efforts to track down money and that it would somehow do more. The OSC’s pledge to publish its collection rates in its annual reports means investors and the public will be able to judge whether things are getting better.

Meanwhile, the OSC's poor collection record could factor into the current debate over whether it should adopt U.S.-style “no-contest” settlements with alleged wrongdoers, which allow them to neither admit nor deny liability. Some argue this would speed up settlement talks in certain cases and allow the agency to concentrate on bigger fish. Critics say it lets bad guys get away without punishment.

Ontario is already the holder of a reputation as a place where white-collar criminals get off easily. It is easy to see why critics will say a move by the OSC to allow some violators to get out of admitting liability, even while most are already getting out of paying their fines, would reinforce that perception.

Barbara Shecterbshecter@nationalpost.comCanada’s largest capital markets regulator revealed Wednesday that a substantial portion — more than 50% — of the financial penalties imposed for securities breaches has not been collected.

The Ontario Securities Commission published a list of delinquencies, which add up to tens of millions of dollars.

Investor advocacy groups have long pushed for the release of such information to help gauge whether enforcement actions are having the desired effect of deterring other wrongdoers or those considering breaking securities laws.

“The recovery of monetary sanctions in many proceedings is limited because respondents may have no assets or limited assets, may no longer reside in Ontario, or cannot be found,” the OSC said in its report. It noted that others who have found themselves in the crosshairs of regulators “may have hidden assets in the names of others.”

The numbers show a big difference between settlements and cases where the accused contest the allegations.

Between 2005 and 2011, the commission collected slightly more than 70% of the $155.5-million in monetary sanctions and costs from settlements, but less than one percent of the $73.4-million in financial sanctions meted out at the conclusion of contested hearings.

In total, less than 50% of the sanctions from that period have been collected to date.

“The record of poor collection speaks to the need for more effective enforcement in securities regulation in Canada,” said Ermanno Pascutto, executive director of the Canadian Foundation for the Advancement of Investor Rights.

“With greater transparency Canadians have a better understanding of the extent of the problem and perhaps can get the governments to work together to improve the effectiveness of sanctions,” added Mr. Pascutto, whose organization was in favour of the recent failed push for court approval to fold the country’s 13 provincial and territorial securities regulators into a single, national market watchdog.

“Canadians should be really asking whether our system of securities regulation is as effective as some players would have the public believe,” Mr. Pascutto said.

FAIR has studied the record of sanctions collection by Canada’s self-regulatory agencies and pushed for the OSC to provide details.

The OSC, which has operated under new chairman Howard Wetston since late 2010, pledged Wednesday to include ongoing disclosure about the collections rate in its annual reports.

“We are pleased to see this significant improvement in transparency on the part of the OSC,” said Mr. Pascutto. “It is another indication of the sea change in the OSC since Howard Wetston became chair.

Larry if you want examples of the ASC I think this one will be the perfect case. I have a conference call tonight with the court ordered lawyer regarding what we are to do. As far as I can figure here is a quick summary of events;-ASC Approves Edgeworth Properties-Edgeworth raises money indicating that investors receive their distributions by adding value to land through development processes; investors are also told this is a safer type investment because you hold title to the land-ASC puts Edgeworth MIC on cease trade but lets them continue raising capital for three other projects-ASC never revisits the cease trade or follows upInvestors money is lost due to three larger companies coming in and taking first position on the land; investors never had title and their monies never properly recorded or used.- No mention of this is anywhere on the ASC website and no other cease trades for the other projects have been made. Edgeworth is defunct and no longer exists the land has moved to three companies and no concession has been made by the court or regulatory body regarding investors monies.

SEC disciplines 8 employees over Madoff fraudNone are fired for failing to uncover the pyramid scheme over a 16-year period.Los Angeles Times http://www.latimes.com/business/la-fi-s ... 1641.storyAssociated PressNovember 11, 2011, 4:17 p.m.The Securities and Exchange Commission said it has disciplined eight employees for failing to uncover Bernard Madoff's pyramid scheme over a 16-year period. None of the employees was fired.

SEC spokesman John Nester said the discipline varied. The pay for three employees was reduced. Two were given 30-day suspensions without pay, one of whom also got a pay cut. The others were given shorter suspensions or counseling memos. The actions were based on the recommendations of a law firm hired by the agency.

Two years ago, the SEC inspector general questioned the conduct of 21 employees in a report on the Madoff affair. Ten of those employees have since left the agency.

The SEC has been criticized for failing to spot the pyramid scheme. Madoff is serving a 150-year sentence for securities fraud.

Canada's largest capital markets regulator on Friday unveiled a series of policy initiatives, including a form of immunity for wrongdoers and "no contest" settlements, aimed at improving enforcement of securities laws.

Shortly after former judge Howard Wetston took over as chairman of the Ontario Securities Commission last year, he said the regulator was considering adopting tools such as immunity and credit for cooperation used in other jurisdictions such as the United States in an effort to uncover more wrongdoing.

In addition to the "no-enforcement action" agreements - where, in exchange for selfreporting breaches of Ontario securities laws, people would not be subject to OSC enforcement action - the regulator is proposing a "no contest" settlement program where an order could be made without requiring an admission of a breach of securities law.

These enforcement methods, along with clarification of the regulator's credit for co-operation program, are intended to improve the amount, quality and timeliness of information coming to the commission.

Kent Thomson, head of the litigation department at Davies Ward Phillips & Vineberg in Toronto, said adoption of a "no contest" option is likely to encourage more settlements because it will remove the fear that admissions of fact will be used in other potentially costly actions - such as class action lawsuits and U.S. Securities and Exchange Commission claims.

But Ermanno Pascutto, executive director of shareholder rights group FAIR Canada, said he hopes the regulator uses the "no contest" tool sparingly, more as an exception than a rule.

Otherwise, Mr. Pascutto said, the OSC could "undermine" the civil pathways to compensation for victims of securities law breaches.

He noted there has been a recent backlash in the United States, with even a U.S. federal court judge suggesting there is an element of a "sweetheart" deal when those who settle neither admit nor deny securities laws have been breached.

"People are confused. They ask, why, if they did those things, aren't they required to admit it?" Mr. Pascutto said.

Mr. Thomson, who has litigated many times both for and against OSC staff, countered that individuals and companies often want to settle OSC matters to resolve the issues even when they can make a good case that they did not break any securities laws.

"There is a risk of taking any contested case to trial," he said, adding that a full hearing requires a large commitment of time and money with no guarantee of the outcome. In addition, there is "almost always reputational harm associated with taking a case to trial on a contested basis," even when that case is "viable," Mr. Thomson said.

Jon Levin, a veteran Canadian securities lawyer at Fasken Martineau DuMoulin LLP, said he finds it "extraordinary" that the OSC is only now adopting the enforcement tools that have been used for many years in jurisdictions such as the United States.

Their absence in Canada "has been a significant handicap in the timely resolution of allegations of wrongdoing," he said.

Tom Atkinson, director of enforcement at the OSC, acknowledged a longstanding debate in this country over whether the best outcome in securities cases is "getting something done quickly and ... when it's relevant to the marketplace, or having full admissions made years after the fact."

In an interview Friday, Mr. Atkinson said Mr. Wetston has been "pushing" to speed up enforcement actions since his arrival as head of the OSC last year.

The commission, which has consulted with litigators and other regulatory agencies, will take feedback on the policy initiatives until Dec. 20. Consideration of an incentive-backed whistle-blower program is also under way, the commission said, adding that it is seeking input on the first wave of policy changes "to help inform [OSC] staff on these and future enforcement initiatives."

Advocate comment: In the $32 billion dollar theft of money using ABCP (toxic sub prime mortgage paper http://www.albertafraud.com ) the first crime was the breach of public trust when securities commissions in Canada gave their friends in finance, permission to "exempt" themselves from the law to sell products known to not meet our laws (proof of mens rea (guilty mind) anyone?) They do not want to "talk about it" now.The second crime was the $32 billion dollars that was put into the pockets of investment banker types selling this crap.The third crime was when American authorities got involved from the president on down, to fine, punish and gain some compensation for victims within months, while every Canadian authority did nothing. What we did do was the fourth crime, letting a Canadian lawyer get the crooks immunity from lawsuits, the same man who was in on Canada's previous largest crime in the country, the $5 billion dollar tobacco smuggling operation. (source of largest crime figure is RCMP) ( The man and his smuggling op was fined $1 billion.......and he was our sole Canadian solution to this financial crime?)The fifth crime was in members of the Securities Commission not stepping in until the dust was settled, and the public well screwed, and then levying fines of less than one half a penny for every dollar stolen, against those "bad people" to whom they gave permission to "exempt"the law.The sixth crime was letting the criminals, from our trusted Canadian financial institutions KEEP 99.6% of any ill gotten gains, or alternately, not have to compensate customers for these losses. (government bailouts had to be arranged)The seventh crime was watching the RCMP get involved, who then invited in their Ontario Securities Commission (OSC) person who "advises" them on large scale financial crimes. (did I mention this OSC gave the fraudsters the permission.......?) The file was quickly closed without interview of experts or expert information who offered help to understand the crime.The eight crime was letting OSC persons help the RCMP close the file and write their final report, despite having twice been given official complaint of criminal code violations by this same OSC in the granting of the legal exemptions (Breach of Trust, sec 122) The RCMP, in a naive fashion that some have come to expect and some find quite insane, actually allowed persons named to be criminally complicit in a $32 billion dollar theft, to participate in the investigation and final report of the $32 Billion dollar crime. Such power and trust that the "reputation protection system" for this money industry has in our Canada. The ninth crime, is that while the RCMP lets members of the OSC and other self regulatory bodies onto their joint management committees, to share with them information and help "solve" the crime, when the reverse is required, the RCMP do not even have the ability, nor the right to even ask the OSC, or other bodies representing investment dealers, to share with the RCMP details of their own investigations, fines, and/or any information. A one way street exists, allowing the most trusted fraudsters in Canada INTO the RCMP and nothing OUT for benefit of the RCMP.

I could go on, but it seems to be enough for now. Your pension plan was robbed robbed. Your Canadian economy was defrauded. Your "Harper" government bailed out Canadian banks up to $186 Billion with your money (in secret no less) Judges (public service pension) robbed, postal workers, University of Calgary, Governments from top to bottom (again your tax dollars chipped in) two or three suicides resulted, depression, mental anguish, domestic problems, alcoholism, etc. Minor detail for a big operation. "Thanks for the money Canada". We will be back in a month or two with another "great idea" for you. Signed, your Canadian Bankster.

news is old, but still relevant to defrauding billions by our financial fiends

To: Ron Liepert, Alberta Finance Minister

Dear Mr. Liepert,

Further to unanswered questions by Alberta Finance by your predecessors, I wish to ask the following, and request a clear and succinct reply to six direct questions below. It is a matter of urgent public interest to Albertans. (background at http://www.albertafraud.com )

More than a billion dollars of substandard investments have been sold in Alberta, with the permission of the Alberta Securities Commission. (ASC). In Canada $32 billion has gone missing with bad commercial paper (ABCP).

The cost of every other crime in the country is approx $40 bil according to Justice Canada, so we have that one financial crime equalling nearly every other crime in Canada combined.

Several thousand legal exemptions of all kinds, have allowed substandard investments and advice to be provided to Albertan’s, without any notice being sent to the investors. To consumers.

Six questions went unanswered by Iris Evans despite eight requests and Ted Morton three requests.

3. -What public interest is served by allowing financial laws to be violated?

4. -Why are laws allowed to be broken without public input and public notice? In secret.

5.-Why is Alberta Finance suppressing this information, rather than protecting the public interest? 6.-Where is evidence of the public interest obligation of the Securities Commission?

Here is the only answer received to date from the Alberta Finance:

“In this particular situation (ABCP) it appears the commissions carefully considered the situation and acted properly in granting the exemptions.”

Here is the official reason given by the ASC for most legal exemptions:

“Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.”

These answers are non answers and they are an insult to the public. There appears to be a damaging incestuous relationship between the financial services industry and our government securities regulator. Our Minister of Finance should be moving forcefully towards honest accountability. Anything less may constitute a breach of trust. Anything else leads one to assume a corrupt relationship between the ASC and industry.

These matters have caused billions of dollars to be siphoned out of our economy assisted by 13 securities commissions. Will you Mr. Liepert please take steps to answer these questions for the benefit of all Albertan’s?

Ask your own provincial Minister as well as the Chair of your provincial securities commission these questions:

Oct 15, 2011

To: Ron Liepert, Alberta Finance Minister

Dear Mr. Liepert,

Further to unanswered questions by Alberta Finance by your predecessors, I wish to ask the following, and request a clear and succinct reply to six direct questions below. It is a matter of urgent public interest to Albertans. (background at www.albertafraud.com )

More than a billion dollars of substandard investments have been sold in Alberta, with the permission of the Alberta Securities Commission. (ASC). In Canada $32 billion has gone missing with bad commercial paper (ABCP).

The cost of every other crime in the country is approx $40 bil according to Justice Canada, so we have that one financial crime equalling nearly every other crime in Canada combined.

Several thousand legal exemptions of all kinds, have allowed substandard investments and advice to be provided to Albertan’s, without any notice being sent to the investors. To consumers.

Six questions went unanswered by Iris Evans despite eight requests and Ted Morton three requests.

3. -What public interest is served by allowing financial laws to be violated?

4. -Why are laws allowed to be broken without public input and public notice? In secret.

-Why is Alberta Finance suppressing this information, rather than protecting the public interest? -Where is the public interest obligation of the Securities Commission?

Here is the only answer received to date from the Alberta Finance:

“In this particular situation (ABCP) it appears the commissions carefully considered the situation and acted properly in granting the exemptions.”

Here is the official reason given by the ASC for most legal exemptions:

“Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.”

These answers are non answers and they are an insult to the public. There appears to be a damaging incestuous relationship between the financial services industry and our government securities regulator. Our Minister of Finance should be moving forcefully towards honest accountability. Anything less may constitute a breach of trust. Anything else leads one to assume a corrupt relationship between the ASC and industry.

These matters have caused billions of dollars to be siphoned out of our economy assisted by 13 securities commissions. Will you Mr. Liepert please take steps to answer these questions for the benefit of Albertan’s?

I have asked the ASC and Chairman Bill RIce, a few times now, if they can provide answers and describe procedures in granting permission to financial firms to violate our laws and violate the public financially. No luck. No answers. This time, the reply I got contained no name even. Very funny to see how they act when confronted with the possibility of guilt in helping defraud the public. Here is my latest correspondence:

Starting from last to first, with this October 18th reply to the ASC:

Thank you for your prompt reply.

I appreciate taking the time to acknowledge my correspondence, although it must be noted that your reply is done anonymously for some reason.

Also, it must be pointed out that in your reply where you state, "Alberta securities laws list certain terms and conditions that are required when relying on exemptions to distribute securities", you are misunderstanding my question for Mr. Bill Rice. I wonder why a public servant would refuse to answer simple public interest protection questions?

Third, I must point out that none of the questions posed on behalf of the public interest were addressed by this anonymous reply.

The questions refer to the process by which the ASC itself uses to determine and to protect the public interest of Albertans.

I feel that it would be appropriate to restate each of my questions and resend them to Mr. Rice, in hopes that eventually we may obtain a suitable answer for Albertan's.

Thank you in advance for sending my questions to Mr. Rice and I look forward to a reply from Mr. Rice or from someone authorized by him to respond.

I write to seek clarification on issues surrounding the public interest protective mandate of the ASC. I seek your help in understanding the ASC position relating to public protection and to exemptive relief to the Securities Act.

If I could trouble you or your agency to help me with these questions, it would be appreciated:

What general reasons are involved in granting investment firms or others, permission to violate the law in Alberta when selling, manufacturing or marketing investment products or advice, or other related matters under your jurisdiction? (exemptive relief to the Securities Act)

[color=#FF0000][color=#FF0000]Is there a public interest test, or a documented process used to determine the effect on public protections of exemptive relief applications?

Are procedures in place to allow for public input into the process involved in granting of exemptive relief application that may affect the investing public?

What requirements (or procedures) do you have to give notice to the public when their protective laws are being lifted?[/color][/color]

I thank you for taking the time to reply to these questions, as they seem to be of some importance to Albertan’s.

Best Regards

Larry Elford

On October 18, 2011, at 4:42 PM, media wrote:

Dear Mr. Elford

As we have explained in our response to your previous inquiries, Alberta securities laws list certain terms and conditions that are required when relying on exemptions to distribute securities. The terms and conditions for these exemptions were developed and are reviewed on an ongoing basis with the public interest in mind. Furthermore, the Alberta Securities Commission is subject to, and follows a prescribed process for the creation of, amendment to, and exemption from Alberta securities laws whereby all such proposals are published on our website with an open invitation for public comment.

This was my response from the ASc, although no names were given.

ASC (or someone going by the name of "media") response is in blue.

I will keep updating the public until criminality is either proven or procedures for the public interest are improved towards best practices.

This story is a bit dated, but I just ran across it while doing other research and I did not recall posting it before, so here it is, ASC not following their own rules.=============================================

ASC resignation sought

The Alberta Securities Commission came under fire again Thursday, with an opposition leader calling on its top enforcement boss to resign so an investigation can be done into the latest controversy dogging the regulator.

BY THE CALGARY HERALD NOVEMBER 25, 2005

The Alberta Securities Commission came under fire again Thursday, with an opposition leader calling on its top enforcement boss to resign so an investigation can be done into the latest controversy dogging the regulator.

NDP Leader Brian Mason told reporters that the government needs to order a thorough examination of a case involving the ASC's director of enforcement, John Petch, who bought and sold shares of a company being investigated.

He said Petch should move aside, while an academic with one of the country's top business schools wondered why the official was still in the post.

"How can they let this guy keep his job? It doesn't make any sense at all," said Richard Powers, assistant dean at the University of Toronto's Rotman School of Management.

"(Petch) had an obligation to distance himself from the company as soon as he found out it was under investigation. There's clearly a perception of conflict -- that's the issue here. In the court of public opinion, the ASC has blown it again."

The comments came as the government released a letter from the commission that provides new details on the matter, stating there was a "breach of ASC policy" when Petch bought and sold shares of an unnamed company at the same time it was being investigated by the commission.

According to the letter, Petch bought the stock March 10, 2004, on the advice of his broker before being made aware later in the day of the investigation. He subsequently discussed the matter verbally with ASC executive director David Linder -- who said he could not recall the specifics of the conversation -- and filled out the necessary forms outlining the details of the purchase.

According to provincial Auditor General Fred Dunn, who investigated the ASC's enforcement practices as part of an October report to the legislature, Petch realized a "significant gain" when he sold the stock more than three months later.

Finance Minister Shirley McClellan, who is responsible for the regulator, said while the incident indicates there was a policy breach, it wasn't any worse than that -- and it has been dealt with.

"There was no use of confidential information, no interference with the conduct of the ASC file and no breach of ethical standards," McClellan told the legislature.

"The breach . . . of the ASC policy has been dealt with internally by the ASC."

She added that what is important is the ASC has acknowledged to Dunn that great discipline should be introduced into the oversight of ASC trading-related policies in order to both prevent and detect breaches.

But Mason, who's recent questioning had helped yield the release of further details, challenged the explanation contained in the ASC's letter and later called for a thorough investigation of the matter.

"When there are serious breaches -- or minor breaches -- by the people that are responsible for enforcing the rules, it requires somebody else to investigate because obviously the system has broken down," Mason told reporters.

"The system of enforcement, because of this case, has broken down in the ASC."

Mason also questioned why someone in Petch's position was able to hold and trade shares regulated by the commission.

Other observers chimed in Thursday.

Shareholder advocate Diane Urquhart, who has closely followed the ASC debacle since it erupted almost a year ago, considers it a "fatal error" that Petch sold and profited from the shares while the ASC's investigation was ongoing.

"He might have known there was going to be negative news pending, he might have known the file was going to be closed -- it doesn't matter. The point is he had access to information other investors didn't have."

The ASC, however, says Petch purchased the shares before he was aware the company was being investigated.

The ASC has been embroiled in controversy ever since a group of staff whistle-blowers brought forward allegations that senior officials protected well-connected friends and condoned unprofessional behaviour.

McClellan told the legislature in April that top executives at the commission had been cleared of any wrongdoing by Perry Mack, a Calgary lawyer who conducted an independent investigation.

McClellan did not publicly release Mack's report, hoping instead a systems audit by the auditor general would remove lingering doubts about the ASC.

After examining 82 of the regulator's cases, Dunn concluded there was no need for files to be reopened. However, he found major investigations were at times dogged by poor record-keeping, particularly sensitive and high-profile cases.

ASC chairman Bill Rice, appointed to the regulator's top job July 18, has himself become the subject of controversy, first for staying on as chairman of Calgary-based Tesco Corp. for three months while running the ASC, and then for failing to meet an insider trading disclosure deadline, which resulted in a $1,000 late filing penalty from the Ontario Securities Commission.

Alberta Liberal Leader Kevin Taft has since called for Rice's resignation, arguing the dual role -- normally prohibited at securities regulators -- undermined the credibility of the regulator.

Meanwhile, the RCMP is reviewing a request to launch an investigation into possible improprieties involving securities law enforcement at the ASC.

In a letter to Taft, who had requested the RCMP examine 11 ASC enforcement cases identified by Dunn to have been improperly and insufficiently documented, Insp. Bruce Fillier acknowledged that the force's Calgary Integrated Market Enforcement Team is reviewing the complaint and will respond "in due course."

Advocate comment......from the RCMP topic in this forum it is known that the RCMP IMET is charged with investigation of one single large scale financial matter at a time, we can rest assured that when the RCMP say "in due course", that is inept policeman jargon to mean "sometime in the twenty second century".

Canada’s investor dispute resolution service is embroiled in a dispute of its own because some major investment dealers want to opt out

A private spat three years ago between RBC Capital Markets Ltd. and the Ombudsman for Banking Services and Investments (OBSI) has now escalated into a public showdown between some of Canada’s largest investment dealers, the handful of self-regulatory bodies that govern them, and the independent mediator that helps resolve disputes for aggrieved customers. Everyone agrees OBSI, the mediator of last resort for financial consumers, isn’t perfect and needs to be fixed. The question is whether it requires tinkering or the radical overhaul that some of the most powerful among the 600 participating banks and investment firms that fund OBSI are seeking.

Put simply, the rebel firms don’t like the way the OBSI metes out justice and want to be exempt from the mandatory rule that they use it to settle investor disputes. They complain they are often shamed into paying OBSI-sanctioned settlements they believe are unfair out of fear of being publicly named for their intransigence. (Even so, there are an estimated 15 cases in which firms are refusing to act on OBSI’s recommendations.)

The majority of investment complaints OBSI receives annually from the public involve “advice-based accounts.” That is, by investors complaining they received poor advice, unsuitable investment strategies or that their investments didn’t perform as expected. The number of cases OBSI handles has steadily declined since the 2008 financial meltdown — it opened 213 files during the second quarter of 2011, a 10% drop from the first quarter — but the value of the compensation awarded is rising, which has dealers hopping mad. In 2010, OBSI, which has a compensation limit of $350,000 per case, recommended awards totaling $3.8 million. TD Waterhouse Canada Inc. has been involved in the most cases, followed by RBC Capital and Investors Group Securities Inc. — the three leading the charge against OBSI.

Earlier this year, those three firms and Manulife Financial Corp. discreetly filed a request with the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) to use private third-party mediators, such as ADR Chambers, to settle investor disputes. They were turned down.In May, the firms then pressed their case at a private meeting with the country’s top securities watchdogs at the Ontario Securities Commission. Again, regulators made it clear they were not willing to abandon OBSI. Ditto for suggestions that IIROC and the MFDA take custody of the ombudsman.

In an attempt to undermine the gathering revolt, OBSI in May issued a consultation paper seeking comment on its contentious loss methodology. Predictably, OBSI opened itself up to criticism from all quarters. Even its most ardent supporters complained about its lack of transparency, accountability, impartiality and less-than-best-practices governance. Nonetheless, most investor protection groups, including FAIR Canada, want OBSI to remain the single, national ombudservice and are advocating minor operational adjustments, though they are concerned OBSI may have been irreparably damaged — if not emasculated — by the now very public disagreement.

OBSI’s board of 10 directors received an assessment report compiled by CEO Douglas Melville and his management team about the industry submissions last month. Another 60-day comment period starts this month. The investment industry will likely win concessions, which may leave customers wondering if they were sacrificed on the road to appeasement.

(advocate, as you read this post, remember that “The US Securities and Exchange Commission imposed 384 times more financial sanctions than Canadian authorities did between 2002 and 2004”Professor Jim Coffee, Columbia University, in a study of Canadian financial markets for the Canadian finance department.)

Nico Doldinger/Cohen Media Group/ BloombergOutraged investors protest outside the courthouse after Bernard Madoff is sentenced to 150 years in prison in New York in June 2009.

By DAVID WEIDNERThank you, Bernie Madoff.It isn't a joke. And, no, Irving Picard, I didn't make money from Mr. Madoff's massive fraud, so call off the lawyers.Still, all of us owe a bit of thanks to Mr. Madoff. After all, without his Ponzi scheme, we might never know how inept, conflicted and wayward the Securities and Exchange Commission has become.The SEC's failure shouldn't be a surprise. John Kenneth Galbraith, writing in the 1950s, predicted its demise. "Regulatory bodies, like the people who guide them, have a marked life cycle," Mr. Galbraith wrote."In their youth, they are vigorous, aggressive, evangelistic and even intolerant. Later, they mellow, and in old age—in a matter of 10 or 15 years—they become, with some exceptions either an arm of the industry they are regulating or senile."If that isn't a fitting description of the 77-year-old SEC, then what is? An SEC spokesman declined to comment Wednesday.What Mr. Galbraith left out is that regulators like the SEC are very hard to kill. It might be even tougher to reform them, and it takes a catastrophe to spur change in Washington.That is why the SEC's inability to catch Mr. Madoff, despite mountains of evidence provided by whistleblower Harry Markopolos, is so beneficial. Without Mr. Madoff's stunning fraud, pressure on the SEC to change its ways might never have mounted to the point it has reached today.Now the SEC is under the kind of scrutiny that might just result in real change.Criticism is mounting in the David M. Becker scandal. Mr. Becker, a general counsel brought on by SEC Chairman Mary Schapiro, was allowed to advise the commission on the Madoff case despite his family's $2 million account with Mr. Madoff.A report issued Sept. 16 by H. David Kotz, the SEC's inspector general, shows that Mr. Becker was shielded from inquiries about the Madoff case, including testifying before Congress. The decision to keep Mr. Becker out of the spotlight and in his advisory role came from Ms. Schapiro, according to Mr. Kotz's report.

Bloomberg NewsWithout Mr. Madoff's stunning fraud, pressure on the SEC to change its ways might never have mounted to the point it has reached today.It is a damning accusation against Ms. Schapiro. She was brought in by the Obama administration to clean up the SEC.The problem with Ms. Schapiro is that, even with some success, most notably in insider-trading cases, she moves at the glacial pace of a career regulator.More than two years into her job atop the SEC, Ms. Schapiro prefers to work within the system, rather than reinventing it.This leads to errors in judgment, such as in the Becker case. It also causes echo-chamber thinking. There is more than just a lack of outside perspective at the SEC. That is why investigative documents were routinely destroyed before and during Ms. Schapiro's tenure.In addition, a Government Accountability Office report found that the SEC didn't maintain effective internal control over financial reporting "due to material weaknesses involving SEC's internal control over information systems and its financial reporting and accounting processes."The SEC signed $400 million in leases for office space without putting its request up for bid.And, just to show the Madoff case wasn't a fluke, Allen Stanford has been charged with his own Ponzi scheme of as much as $8 billion, another mess that the SEC missed.Federal judges have taken the SEC to task for penalizing banks and shareholders, most notably in a settlement with Bank of America Corp., but failing to go after the individuals responsible.Ms. Schapiro also raised the eyebrows of investor advocates this spring when she told a congressional committee that regulations for private placements should be eased, even though many investors have lost money on them.All or parts of those miscues happened during Ms. Schapiro's tenure. Inside the SEC, though, she has staunch defenders who say she inherited a dysfunctional agency. They point to improvements in technology, the hiring of Wall Street specialists to aid rule making, enforcement and plot strategy. An entire layer of management—bureau chiefs—has been eliminated.Ms. Schapiro's backers also say some of the aforementioned scandals have been overblown, especially the shredding dust-up. Her supporters say the documents weren't important to investigations, but they acknowledge that changes are coming slowlyOne senior official said the job is like turning around a battleship.It certainly is true that the failings of the SEC have been percolating for years. It is a long list: failed prosecutions, the slow response to the tainted-research scandal, bungled investigations, internal scuffling exposed by the Gary Aguirre case and employees surfing for porn on their work computers.It would be foolish to think Ms. Schapiro, who has spent her whole career in the system, would be the appropriate person to overhaul that system. So, it is no surprise that even some early supporters are calling for her resignation in light of the Becker case."She's too conflicted with the securities industry to provide the type of leadership that is needed to protect investors," says Andrew Stoltman, a securities lawyer in Chicago.Who should replace her? Knowing the Obama administration's tendency to pick experienced—some would say "safe"—nominees, you aren't going see Mr. Markopolos in front of Congress.But why not Robert Khuzami? Ms. Schapiro's pick for enforcement chief has won rave reviews from even the toughest of critics. And his pursuit of insider trading on Wall Street netted a big fish in Galleon Group co-founder Raj Rajaratnam and put a dent in the practice of selling information.Mr. Khuzami deflected the praise, arguing that any enforcement success he has had is due to Ms. Schapiro. "It doesn't happen without her involvement, her scrutiny and her blessing," he said.Mr. Khuzami isn't the perfect choice. Considering the condition of the SEC these days, though, he has one quality that the Madoff case shows the commission has been lacking. He is effective.

Ken says "what a joke..look what someone wrote on the "readers comments" section of this article..Fair and balanced?"

"With the greatest sympathies for all those who lost money in this investment, there is a facet to the story which is not told here.

The article states “Bridgecreek raised millions of dollars through exemptions filed with the ASC…with little to no requirement for disclosure”. If this is true, then investors purchased “Exempt Securities” which means that they would have declared in writing that they had significant enough income, net worth, or investing savvy to remain financially solvent in the event of Bridgegate’s default.

Further, they would have signed a “Risk Acknowledgement” headed with the word “WARNING”, and which would have outlined the risks of the investment including:- The investment was not reviewed or endorsed by any securities commission- The sales agent was not registered with a securities commission and was not obligated to provide accurate advice- All money invested could be lost

Additionally, the agreement would have included a 48-hour cool-off period to allow investors who may have been emotionally driven by the sales pitch to withdraw from the investment.

Reporting these points would have made the article more fair and balanced."